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Submitted by tigerlily3181 on May 10, 2008
Category: Miscellaneous
Words: 5355 | Pages: 22
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I. Introduction
A. Definition of Convergence
The convergence of U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) can be described as the convergence of national accounting systems for the purpose of forming one set of global standards for publicly held companies. This long-standing task is overseen by the regulating bodies of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) (Scannell & Reilly, 2007, ΒΆ20). While the FASB is overseeing the convergence project in conjunction with the IASB, the Securities and Exchange Commission (SEC) still maintains the authority to set accounting standards for public companies.
Often viewed as a natural development of accounting standards by regulators and users alike, such a project would eventually result in the elimination of GAAP entirely. Securities legislation develops in this way in order to adapt to the increasingly intercontinental context in which transactions occur as a result of the progressively more global securities market. Concurrent with these developments, the issue of maintaining high-quality standards for accuracy and consistency for all constituents utterly and permanently takes precedence. Another aspect of convergence is to understand that the resulting standards will not be identical. Rather, convergence is a long process of negotiation that may take specific issues into account, so some differences will be allowed (Scott, 2006, p. 423).
Steps have been taken by the SEC towards the elimination of GAAP in the form of issued rules and proposals. For instance, in July 2007, Release No. 33-8831, a concept release on allowing U.S. Issuers to prepare financial statements in accordance with IFRS, was released. Release No. 33-8831 allows U.S. companies the option of filing financial statements either under GAAP or the international alternative. Also, a proposed rule called...
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